What is dunning?
Dunning is a word derived in 17th century which stems from the verb dun, meaning to demand payment of a debt. It describes the process of business owners making contact with the customers attempting make a reminder or to collect the owed money for goods or the services provided. In essence, dunning is the advancement of methodically making contact or communicating with customers to ensure that the collection of the specified amount is received. Initiating the dunning procedure or Communication with the customers proceeds from gentle reminders and can progress to phone calls and threatening letters. And if the account becomes more overdue, it may also include visiting the customers house or work location.
Dunning is standardly handled by a business accounts receivable department. But overdue payments can also eventually be turned over to the internal collection department and eventually to the external collection agencies. Most jurisdictions by departments restrict intimidation and also coercion tactics. There are laws that regulate the form dunning in receivable management that can take in each country. However, harassing or threatening customers on any ground is unlawful. Issuing firm bill reminders are a proper and etiquette way to collect all the owed amount.
Online dunning and its importance
With industry 4.0 and the world entering the digital era, online transaction has become an essential part of our day to day life. For example, booking cab services, ordering groceries, online shopping, etc., online transaction is very important and bound to happen somehow for multiple purpose. And with this frequency of online transaction, online dunning or payment related issue in transactions is due to happen because of declined cards, failed payment due to outdated cards, unsuccessful transactions due to other reasons, etc. And with this huge traffic online, keeping track of the exact status of every transaction is a very difficult task. For example, sometimes our money gets deducted from our bank account during an unsuccessful transaction payment, etc. To help in making things smooth, online dunning procedure is necessary for the receivable management. Online dunning is important for:
- Automatic bill retries
- Bill reminders
- Better communication or invoice between both the parties
- Analytics on accounts state.
Dunning for online payments
Dunning for online payments happens when the auto collection is turned on for the specific subscriptions and the first attempt to collect the payment fails. The first reminder is free of charge. Online dunning procedure or the Repayment for the collection is tried by sending multiple invoices, emails and invoice collection to the customer reminding them of the failed payment. Based on the customers’ payment method, a customer can set up two card options:
- Dunning for cards, that is the e wallet payments, and
- Dunning for direct debit payments.
Factors influencing dunning
There are different factors that largely employ the type of dunning used by different businesses. They are:
- the amount of debt owed,
- relationships with customer, and
- the length of time to which the payments are overdue.
Processes involved in dunning
The process of dunning or collection includes different steps proceeding from different degrees of intensity for different customers. Initiating the dunning procedure includes:
Step 1. It involves making phone calls or invoices to the customers for gently reminding them of the due payment.
Step 2. Here, we can write formal dunning letters or reminder by the email to the customers to request for the payment. Writing the online Mahnungen is free of charge.
Step 3. This step involves visiting the customers in person to demand for the payment.
Step 4. We can also hire different agencies or third party collections to lean on for the delinquent customers.
Step 5. We can threaten the customers to take legal actions.
Step 6. Last step involves executing the customers with litigation.
Dunning management is an automatic process which helps us in:
- Setting up smart retries for failed payments.
- Sending the customers invoices or reminders about the credit cards declined due dates.
- Alerting the customers or reminder by the email through formal dunning letters or emails that something has not gone right in the previous transaction.
- Requesting the customer with an OTP so that the customer can get the updated information about the credit card from the credit card provider.
Therefore, a dunning solution refers to the recovery of the payment through online mode using different software that contacts the customers about the payments which are due because of various reasons such as due to memberships, subscription-based business, online transactions, credit card’s payment delay, etc.